Bloomberg Confidence Index Gains as Housing Boosts Outlook

Consumer confidence rose to a six-month high and an index of U.S. leading indicators climbed as a nascent housing recovery started to ripple through the world’s largest economy.

The Bloomberg Consumer Comfort Index rose to minus 34.8 in the week ended Oct. 14, the highest level since April, from minus 38.5 the previous week. The Conference Board’s gauge of the outlook for the next three to six months increased 0.6 percent in September after a revised 0.4 percent drop in August.

Rising property prices in some parts of the country are bolstering household finances and lifting the moods of shoppers, whose spending accounts for 70 percent of the economy. Stock-market gains are also making Americans feel wealthier and contributed to the increase in the leading index, along with a jump in permits for home construction.

“This is just an echo of yesterday’s very strong permits numbers, which were very encouraging,” said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey, who correctly forecast the increase in the leading index. In addition, “the change in the tone of the housing sector seems to be what’s driving the improvement in consumer sentiment,” he said.

Building permits, among the six of 10 indicators that boosted the leading index, jumped to highest level since July 2008, Commerce Department data showed yesterday. Housing starts climbed 15 percent in September to reach a four-year high.

Jobless Claims

Other reports Thursday showed claims for unemployment benefits rose more than forecast, reflecting an unwinding of adjustments for seasonal swings at the start of a quarter, and manufacturing in the Philadelphia region expanded.

Stocks fell, following a three-day advance in the Standard & Poor’s 500 Index, as Google Inc. pulled down technology shares after reporting third-quarter profit and sales that missed estimates. The S&P 500 dropped 0.2 percent to 1,457.34 at the close in New York.

Elsewhere, China’s statistics bureau reported that industrial production, retail sales and fixed-asset investment accelerated in September. The world’s second-largest economy expanded 7.4 percent in the third quarter from a year earlier, matching the median estimate in a Bloomberg survey.

Jobless claims in the U.S. increased by 46,000 to 388,000 in the week ended Oct. 13 from a revised 342,000 the prior period that was the lowest since February 2008, Labor Department figures showed. The median forecast of 49 economists surveyed by Bloomberg called for a gain in claims to 365,000.

New Quarter

The typical pattern of large increases in unadjusted claims at the start of the quarter seems to have shifted by a week in one state, causing the adjusted data to become volatile, a Labor Department spokesman said as the figures were released to the press.

The Federal Reserve Bank of Philadelphia’s general economic index rose to 5.7 in October from minus 1.9 in September, a sign the industry may be starting to stabilize. A reading of zero is the dividing line between expansion and contraction. The median forecast of 61 economists surveyed by Bloomberg was for an increase to 1.

The U.S. economy is “choppy, but modestly moving in the right direction,” David Doft, chief financial officer of New York-based marketing communications firm MDC Partners Inc., said on an Oct. 11 conference call. “Jobs are improving a little. Housing prices seem to be improving a little. And these are the sort of things that I think marketers look at when they’re trying to predict future consumer behavior.”

The consumer comfort index was boosted by all three components -- measuring the state of the economy, Americans’ views of their personal finances and the buying climate.

Retail Sales

Growing confidence may mean Americans spend more during the holiday season, the most important time of the year for retailers. November and December sales can account for as much as 40 percent of an individual retailer’s annual revenue, according to the National Retail Federation.

Retail sales advanced 1.1 percent in September following a revised 1.2 percent increase in August, the best back-to-back- showing since late 2010, the Commerce Department said Oct. 15.

The improvement in confidence comes less than a month before Americans head to the polls. Incumbent President Barack Obama, a Democrat, is trying to make the case that his policies will best boost the economy, while Republican challenger Mitt Romney says the president is at fault for a lack of vigor in economic growth.

Presidential Election

Sentiment among Democrats has climbed 13.6 points since the first week of September, and 19.7 points among Republicans. The gauge for independents has advanced 5.2 points and remains the lowest of the three.

“Since independents are the customary swing voters in national elections, their continued economic disaffection may counter any impact of improvements that have occurred most steeply among partisans on both sides,” said Gary Langer, president of New-York based Langer Research Associates, which compiles the index for Bloomberg.

Compared with previous elections, the index is neither low enough to signal a defeat for Obama, nor high enough for him to secure victory. The gauge was at minus 11 in mid-October 2004 shortly before President George W. Bush was re-elected, and minus 5 when Bill Clinton was returned to office in 1996. It was at minus 48 in 1992 when George H.W. Bush failed in his bid for a second term.

Jobless Rate

A decrease in the jobless rate to a three-year low of 7.8 percent in September may help explain why the comfort index has climbed in seven of the past eight weeks.

Signs of a revival in housing have also contributed. Builder sentiment was the strongest since June 2006, the National Association of Home Builders/Wells Fargo reported this week.

Hovnanian Enterprises Inc., based in Red Bank, New Jersey, is among homebuilders seeing gains in sales this year as buyers return to the market.

“Now that housing has started to recover and recover more strongly, you will see economic growth because it’s going to put people back to work,” said Larry Sorsby, Hovnanian’s chief financial officer, said in an interview Wednesday.